The Thorco Lineage: Limitation Under The Hague-Visby Rules Where There Is Physical Damage And Economic Loss

• Published date: 07 September 2023
• Subject Matter: Transport, Marine/ Shipping
• Law Firm: Quadrant Chambers
• Author: John Russell and Benjamin Coffer

Trafigura PTE Ltd v TKK Shipping Ltd ("The Thorco Lineage") [2023] EWHC 26 (Comm)

Part of a cargo suffers some minor physical damage. But, an economic loss is suffered in respect of the whole of the cargo - perhaps a diminution in market value due to delay, a liability to pay salvors, or transhipment costs.

In The Limnos [2008] 2 Lloyd's Rep 166, Burton J held that under Article IV(5)(a) of the Hague Visby Rules the economic loss fell to be limited by reference to the weight of the physically damaged cargo, but that if there was no physical damage, the claim would be unlimited. This led to many anomalies, most notably that if there was minor physical damage the entire claim might be limited to a few dollars, but if there was no physical damage at all, the economic loss claim would be unlimited.

In The Thorco Lineage [2023] EWHC 26 (Comm)), Sir Nigel Teare declined to follow The Limnos and rejected the argument that Article IV(5)(a) limits claims for economic loss by reference only to the weight of cargo which suffers physical damage. Rather, he held that the limit is to be calculated by reference to the weight of cargo physically or economically damaged.

Article IV(5)(a) of the Hague-Visby Rules limit's the carrier's liability for "loss or damage to or in connection with the goods" by reference to the higher of two alternative figures: 666.67 SDR per package or unit or 2 SDR per kilogram of gross weight of "the goods lost or damaged".

In The Limnos, Burton J held that the words "the goods lost or damaged" only encompass goods which are physically lost or damaged, so that where an incident causes limited physical damage but substantial consequential economic losses, the carrier can limit its liability by reference to the weight of cargo physically damaged. Further, he held that in the phrase, "loss or damage to or in connection with the goods", "the goods" were only those which were physically lost or damaged.

Sir Nigel, sitting as a Judge of the Commercial Court, declined to follow the analysis of Burton J, preferring the view that goods which suffer a diminution in value are "lost or damaged"...